Redlining is a crucial phase in contract negotiations. Essentially, it’s a collaborative, back-and-forth process where changes and improvements are made to a contract negotiation to reach a final agreement that works for all parties involved.

Effective redlining can significantly reduce negotiation times, prevent costly errors, and lead to more favorable outcomes for everyone. In this guide, we’ll tell you everything you need to know about redlining and show you how to do it effectively. 


What Is Redlining?

Redlining is the process of reviewing a contract document and then adding, modifying, or deleting content or language, and indicating where such changes have been made so they are easily noticeable to the other party. The ultimate goal is to produce one single, unified document that satisfies all the parties to the deal.

The term “redlining” has its roots in the historical practice (particularly in the legal field) of using red pens or pencils to mark up or edit physical document copies before handing them on to the next editor. This vivid red ink made any modifications visible, allowing each participant to follow the evolution of the contract with ease through tracked changes. The process continued, going back and forth until all parties reached a consensus, culminating in a clean final document that would form the agreement.

While the essence of redlining hasn’t changed, its execution has evolved dramatically with technology today. Manual marking with red pens has given way to sophisticated word processors and digital tools that streamline the process. 


Best Practices for Redlining

Now that you know what redlining is, let’s get into how to do it efficiently. Here are eight best practices for streamlining the redlining phase of contract negotiations.


1. Identify All Contributors

Start by identifying all the individuals on your side who’ll or might be involved in the redlining process and their respective roles. Ask for the same information from the counterparty. This practice avoids confusion about who is making changes and for what reasons, and fosters transparency. If you’re using a secure digital space like a virtual data room to complete the redlining phase of your deal, you’ll want to ensure this special group has access to edit the contract document(s) as well as any supporting background information they may need.  


2. Use Clear and Specific Language 

Clarity is paramount in any document redlining process. Avoid ambiguous language and be clear in your edits and comments. Use straightforward and precise terms that leave no room for misinterpretation.

For instance, instead of vaguely suggesting “consider revising”, specify the exact change needed, such as “replace ‘shall’ with ‘must’ for legal clarity”. This language precision can expedite the negotiation process by reducing back-and-forth clarifications. Moreover, clear language helps in maintaining the document’s overall coherence, making it easier for future readers to understand the agreed-upon terms.


3. Keep Redlines Legally Complaint 

Equally as important as being clear and specific in redlining is ensuring that your edits align with legal standards and regulations relevant to the contract of interest. This not only averts potential legal disputes down the road but also maintains the contract’s enforceability.

Involving your legal department or an M&A lawyer early in the redlining process can help with this element. They can offer guidance on the legal ramifications of certain terms and help you sidestep common legal errors.


4. Organize Progress Meetings

Organizing progress meetings throughout the redlining process can improve its efficiency and outcomes. These meetings serve as checkpoints to discuss progress, clarify any misunderstandings, address new concerns, and resolve disagreements in real-time. They also offer a chance to align on the changes made so far, reassess priorities, and adjust timelines as necessary.


5. Track Every Change

When redlining contracts, make sure to track and preserve every single change. Most document editing programs have a “Track Changes” feature that allows you to ensure that every edit, comment, or suggestion made is recorded and attributed to the proper editor. 

Comprehensive tracked changes not only provide a clear visual history of the document’s evolution but also ensures every party’s input is acknowledged. It also helps foster trust and transparency between parties.


6. Take Your Time

While it’s still important to operate within a set timeframe to keep pace with business demands, it’s equally as crucial not to rush through contract redlining. Hurrying through the process can lead to oversights or misinterpretations, which can in turn result in costly errors or disputes later. Allowing sufficient time for redlining ensures a more thoughtful and detailed examination of the contract, leading to a more solid and mutually agreeable final document.


7. Accompany Redlines With Explanations

When redlining a document, there are times when it might be beneficial to provide a brief rationale or explanation for the redline. This means adding brief yet informative comments alongside changes in the redlined document to clarify the reasoning. Providing the reasoning behind a change or suggestion encourages the other party to consider it more thoughtfully rather than perceiving it as arbitrary or adversarial.

Note that this doesn’t apply to every redline. If you’re just making formatting changes, for example, you don’t need to provide a rationale. Also, if you need to provide a longer explanation, do it through a live conversation or a comprehensive email message rather than via a comment on the redlined document.


8. Verify and Clean the Final Document Before Requesting a Signature

Whether the final draft originates from your side or the other party’s, make sure it truly reflects and represents the terms agreed upon during negotiations. Confirm that the other party has applied the relevant changes that you asked them to. Use document comparison tools to compare the initial draft, the redlined document and the final version to confirm that all necessary amendments have been done.

Once verification is complete, proceed to “clean” the document. Meticulously review it to eliminate any grammatical errors, typos, or improper phrases. At this stage, your contract is ready for signing.


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Step-by-Step Guide: Redlining in Word and PDF Programs

The actual process of redlining varies depending on the tool you’re using to edit. Below is a look at how to redline documents in Word and PDF the smart way.


How to Redline Documents in Word 

  1. Start by opening the contract or document you want to redline in Microsoft Word.
  2. Once the document is open, go to the “Review” tab in the Word toolbar. Click on the “Track Changes” option to activate this feature. From this point onward, Word will record any edit you make, and the document will display changes in a visually distinctive manner.
  3. Edit the document as needed. You can delete or add text, modify formatting, or make any necessary changes. Word will automatically highlight your additions and strike through deleted text.
  4. If you want to provide explanations or comments for specific changes, use the ‘New Comment” feature in the “Review” tab. This allows you to attach comments to specific parts of the text without altering the original content.
  5. After making edits (or after receiving a document from the other party with edit requests), you can go through them using the “Next” and “Previous”  buttons in the “Review” tab and decide whether to accept or reject them.
  6. If you have multiple document versions and want to compare changes side by side, use the “Compare” feature under the “Review” tab. You can use the same tool to merge different versions into a single document.
  7. Remember to save the redlined document versions regularly, particularly after accepting or rejecting changes to maintain a record of its evolution.


 How to Redline Documents in a PDF Program

  1. Start by opening the contract or document you want to redline in a PDF program. We’ll use Adobe Acrobat here.
  2. In Adobe Acrobat, head to the “Tools” pane on the right-hand side. Click on “Comment” to reveal a toolbar with various commenting tools.
  3. Choose the appropriate commenting tool for your edits. These include sticky notes, text boxes, highlighting, strikethrough, and more.
  4. Click on the chosen commenting tool, and then click or drag your cursor over the area of the PDF where you want to make a comment or edit. A comment box or annotation will appear, where you can add your notes or proposed changes.
  5. After adding comments or annotations, save the redlined document with a new file name to preserve the original document.


How to Ensure Document Security With CapLinked

Redlining typically includes a lot of back and forth between the multiple parties negotiating a contract, as mentioned. This, unfortunately, increases the risk of sensitive documents falling into the wrong hands — particularly if you’re using unsafe document-sharing methods like email, or even tools like Dropbox, which have been shown not to be 100% safe.

Thankfully, you have options.

CapLinked, for example, offers a comprehensive solution for all your secure file-sharing needs. CapLinked virtual data rooms (VDRs) come with advanced security features such as military-grade encryption, digital rights management, access controls, audit trails, and many more. Caplinked also features built-in collaboration tools, which allow you to conduct redlining and follow tracked changes to both Word documents and PDFs without ever leaving the secure space of your data room. These features all work together to create an impenetrable shield for your sensitive documents throughout the redlining process.


Experience CapLinked’s advanced security capabilities first-hand by signing up for a free trial today.



Sean LaPointe is an expert freelance writer with experience in finance and tech. He has written for several well-known brands and publications, including The Motley Fool and Angi/HomeAdvisor.



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